European energy perspective: High North – New dimensions

RSS From: Government - Energy
Published: 11.05.2012

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Introduction

Pleasure to be here. Welcome the Memorandum of Understanding on cooperation signed between the Norwegian Institute of International Affairs (NUPI) and its counterpart and the hosting institution for this event, the Polish Institute of International Affairs (PISM).

Acquiring knowledge is a cornerstone of our approach to the High North and for understanding a world that is undergoing rapid change in general. Welcome closer cooperation between these two research institutions.

My departure point: Norway as a major energy and climate player in the High North, which is on its way to becoming a new geopolitical centre of gravity.

Energy and climate change important parameters in European and global geopolitical discourse.

Last autumn I presented my Government's white paper on our High North policies. Why did we make the High North a priority for our foreign policy?

Three main drivers:

Climate change

Developments in Russia

The potential for resources and economic activity

What Norway brings to the table: energy resources, climate ideas/concepts, a High North/ Arctic perspective, innovative and advanced technology combined with extensive experience, stable and reliable partner and a foreign policy that integrates these dimensions.

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I Norway's contribution to European energy security

Norway has produced oil and gas for 40 years and is today the world's 2nd largest gas exporter. We supply 35% of the EU imports of natural gas and 20% of EU consumption.

Norway will continue to be a reliable and stable energy producer for decades. A significant part of future petroleum activity will take place in the High North.

Recent discoveries on the Norwegian continental shelf confirm the availability of resources. Some 50 energy companies are operating on the Norwegian continental shelf. We are pleased that there are also Polish companies among them (PGNiG and Lotos).

Norway's energy history dates way back in time: Hundred years ago we started generating electrical power from waterfalls and rivers. This laid the foundation for industrial development. Hydropower is still the backbone of our national energy security today.

Our natural resources have given us advantages. We are also fully aware of the obligations we have as a significant energy exporter. The Government presented a whitepaper on Norwegian climate policy two weeks ago. Announces a climate technology fund (NOK 50 billion by 2020), higher levies on the petroleum industry for greenhouse gas emissions, a strengthened policy for forest management, an increased effort to promote public transport and stricter limits on emissions from new cars.

We are continuously seeking to further reduce the environmental footprint from the shelf. This means improving efficiency and finding smarter, cleaner solutions.

Norway is fully integrated in the EU internal market. Under the EEA Agreement, we have undertaken to increase the share of renewable energy in our total energy consumption to 67.5% by 2020. A system of "green certificates" introduced in cooperation with Sweden on 1 January this year aims to develop 26.4 TWh of additional renewable capacity in the two countries by 2020.

We are firmly committed to making carbon capture and storage (CCS) a realistic option in the future. As part of this multi-billion effort, an advanced CCS Technology Centre opened at Mongstad outside Bergen on 7 May. Acquired knowledge will complement 15 years of CO² storage experience in the North Sea.

Further, through the Norway Grants € 137 mill co-financing has been allocated to the CCS project at Bełchatów here in Poland, which is planned to be ready in 2016. This is the single largest allocation of funding through Norway Grants/EEA Grants. We hope that the Mongstad and Bełchatów teams can work together to exchange experiences and obtain synergies. The project also includes activities aimed at increasing public awareness and understanding of CCS technology.

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II The High North/Arctic perspective

What characterises the High North/the Arctic today? Rapidly growing foreign policy and economic impact, a strengthened Arctic Council, energy exploration, opening of sea routes and growing interest from new players.

Legal framework: The Law of the Sea provides the legal framework for all activities in the Arctic Ocean, which is an ocean surrounded by land under national jurisdiction. (In contrast to the Antarctica, which is land surrounded by ocean).

In the Ilulissat Declaration (28 May 2008 in Greenland) the five coastal states bordering on the Arctic Ocean – the US, Russia, Canada, Norway and Denmark/Greenland – affirmed their continued commitment to the legal framework in the Arctic Ocean and to the orderly settlement of possible overlapping claims.

Most of the resources in the Arctic are to be found within areas of national jurisdiction, within the 200-mile economic zones and the continental shelves of the coastal states.

Norwegian policies and principles for responsible management of the Arctic resources enjoy strong support internationally.

What will be the main developments in the High North/the Arctic in the next 20 years? Let me outline seven key visions and trends we believe answer that question:

First: New geopolitical centre of gravity in the High North. (From Cold War logic and inaccessibility to extensive international cooperation and accessibility to resources and shipping routes. Still military strategic interest and military exercises. Russian fleet. NATO presence. Core areas). Aim: High North – low tension.

Second: The growing attraction of the Arctic Ocean. (some 40 % reduction in sailing time from Yokohama to Rotterdam compared with the Suez route. Increased number of sailings – 34 in 2011).

Third: Close and innovative cooperation in the High North. (Arctic Council. Agenda-setting body. Search and rescue binding agreement, oil spill response, knowledge about climate change – "front row seats"). Poland is one of the six non-Arctic countries admitted as Permanent Observer States to the Arctic Council. We appreciate Poland's contribution to a constructive intergovernmental partnership in the Arctic.

Fifth: Global source of knowledge about the environment and climate change.

Sixth: A new industrial age in the North – also on land. Increased interest in strategically important minerals. Parts of Norway, Finland, Sweden and western Russia make up one of the most promising regions for minerals in Europe.

Seventh: A new energy region in Europe, which leads me to my next key point.

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III High North – the new energy region of Europe

How could the High North, including the Barents Sea, contribute to improved energy security in Europe?

The Arctic as an area with major energy and other natural resources – key source of future European energy security. The US Geological Survey suggests that as much as 22% of the world's undiscovered petroleum resources could be found in the Arctic.

The Barents Sea seems likely to become an important European energy region. How rapidly it develops will depend on market conditions, technological developments, the size of any commercially viable discoveries of oil and gas, and how fast renewable energy sources are developed.

Energy and geopolitics in the north in the interface between Europe, Russia and Asia. Foreign policy implications.

The Norwegian oil and gas industry is moving northwards. New discoveries in the Barents Sea last year. Still a strong possibility that considerable petroleum resources will be found in the Barents Sea. There is a vast acreage waiting to be explored.

Current foothold in the Arctic parts of Norway: Snøhvit and Melkøya – subsea production 150 km offshore, processing LNG onshore. Goliat – floating platform to start production of oil in 2013.

New discoveries and technology may lead to the development of new infrastructure in the future. The resources available and commercial considerations will be decisive.

Increased oil and gas activities in the Arctic must also be weighed up against considerations of other industries and interests within the framework of integrated, ecosystem-based management.

Energy dimension will be the most important driver of increased interest in the High North in both political and business circles globally.

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IV Relations with Russia

As mentioned, our relationship with Russia is one of the three drivers behind our High North strategy. To engage with Russia in close/committed, long-term and sustainable cooperation based on mutual respect will be key to the development of the High North.

In the context of energy, Russia will continue to play a significant role. By far the largest Arctic state – 50% of the coastline, at least 50% of the resources. Influential player in shaping Arctic policies.

The High North used to be a "Cold War theatre". Today – a peaceful region.

Norway and Russia have enjoyed peaceful co-existence for over 1000 years. Since the end of the Cold War, our relations have blossomed. Some examples: Extensive people-to-people cooperation.Gradual increase in the mobility of persons and easing of labour market restrictions: In 1990 around 8000 border crossings at Storskog, in 2005 there were 107 000, and in 2011 almost 195 000. As of 29 May, some 50 000 people living near the Norwegian-Russian border will be allowed to travel to the other side without a visa for up to 15 days. I understand a similar system is being set up for the Polish-Russian border at Kaliningrad.

The Northeast Arctic Cod stock is the best managed fish stock in the world due to joint Norwegian–Russian cooperation on ecosystem-based fishery management in the Barents Sea.

A milestone: After 40 years of negotiations, Norway and Russia agreed on the delimitation line in the Barents Sea and Arctic Ocean in September 2010. Provides legal clarity for the exploitation of natural resources. Peaceful resolution of overlapping claims. Opens up for closer cooperation in the Barents Sea.

Geological survey being carried out in previously contested area with the aim to open up for petroleum activity in spring 2013.

Reaping the benefit of the delimitation agreement, Statoil and the Russian oil company Rosneft just a few days ago agreed to jointly explore offshore areas on the Russian side in the Barents Sea. The deal also includes other offshore and onshore fields in Russia, and also provides Rosneft with an opportunity to acquire interests in selected Statoil exploration licences and assets on the Norwegian Continental Shelf.

Together with other similar agreements concluded between Russian and international petroleum companies the last year, it illustrates the potential for increased cooperation in the High North.

Russia will continue to be a demanding partner. Our policy: Consistency, opening up of relations.

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V The Arctic as an important source of knowledge about global climate change

Knowledge gained in the Arctic increases our understanding of how the climate system works at global as well as regional level. That is why studying the effects of climate change in the Arctic is so important – not only for this region, but also because it can help explain why Lake Chad, which is in the middle of Africa, is drying up and why we see similar patterns throughout the world.

As is the case for Norway, Poland has a long and proud history in the Arctic. Your research station in Hornsund is one of the most important contributors to international climate research in Svalbard. The archipelago offers unique opportunities for research on climate change, the northern lights, deep sea currents and biological diversity. Researchers from more than 20 countries and 400 students from 32 nations at the University Centre at Svalbard (UNIS).

The environment of the High North is very vulnerable. Serious problems related to inputs of long-range pollutants and to hazardous waste, including nuclear waste, on the Russian side of the border. The situation has improved through international cooperation, but strong focus on these problems must be maintained to ensure that economic and industrial activities are within safe ecological limits.

According to the International Energy Agency's (IEA) World Energy Outlook 2011, CO2 emissions have reached a record high, global energy efficiency has worsened for the 2nd year running, and spending on oil imports is approaching record-high levels. Coal has been the winner in the last decade, accounting for almost half the increase in global energy.

According to the IEA, global energy demand will increase by one-third from 2010 to 2035, with China and India accounting for 50% of the growth.

We face a dilemma: How can we – as producers of fossil fuel – also contribute to the fight against climate change?

Less carbon-intensive production. High standards in place. If we do not develop new fields in the Barents Sea for instance, pressure will increase on more carbon-intensive production elsewhere in the world.

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VI Europe and energy security

Let me now turn to the issue of energy security and how it is linked to the High North/the Arctic.

The Fukushima accident in Japan, the German decision to close down all nuclear power plants by 2022, the shale gas revolution in the US (possibly spreading to Europe?), and the reduced supplies from Iran following the US and EU sanctions (supported by Norway) demonstrate that the energy picture can shift rapidly – and have immediate consequences globally. Point of departure – gas will still be needed to secure stable energy provision and as a stabilising energy source to support emerging sources of renewable energy.

Oil and gas from the High North can improve European energy security and make an important contribution to global energy supplies. This has important economic and foreign policy implications. [This was one of the subjects I discussed with Deputy Prime Minister Pawlak yesterday].

Oil and gas from Norway's continental shelf has been a cornerstone in Europe's energy consumption for decades. The trend is clear: exploration and production have steadily moved northward. Expect this trend to continue. Witnessing same trend on the Russian continental shelf.

Energy supplies are being developed in peripheral areas of Europe under increasingly harsh climate conditions. Major geological, environmental, technical and climate-related challenges. Meeting them in a profitable and sustainable way will require knowledge, creativity and innovation.

Security of energy supply cannot be ensured by European countries alone. The financial crisis and high and volatile oil prices make this clear. We have seen increasing tension over energy resources in some regions, not least in the Mediterranean.

The significance of strengthened energy diplomacy, infrastructure and transport routes – within Europe, between other energy regions and Europe, and globally – are important foreign policy issues. A complex picture.

To strike the right balance we must take into account the importance of diversification of energy supply, get the right energy mix and understand how energy interdependency between countries and regions works.

The EU energy roadmap 2050 shows us that there are many ways forward to a decarbonised energy future. But all of them require fundamental changes in energy production and energy transmission systems and the development of infrastructure. The "no-regret-options" that are now being discussed can take us significant steps forward. Investments in renewable energy, energy efficiency and infrastructure all belong to this category and are all preconditions for a new energy future.

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VII Norway - Poland

How can Norway and Poland contribute to the integration of energy and climate change policies (natural gas, CCS and renewables)?

First, the increased use of natural gas in Europe will contribute to a greener energy mix in the future. Gas is the cleanest of the fossil energy sources and CO2 emissions can be significantly reduced by replacing coal with natural gas.

Poland has the potential to become a considerable producer of shale gas. How you will make use of these resources is not for me to say, but Norway welcomes additional gas production in Europe. Further diversification would enhance energy security and strengthen the role of gas. Norway will continue to be a reliable and long-term supplier of natural gas.

Production of unconventional gas is controversial in Europe. I believe the forthcoming IEA special report on how to optimise the potential for a "Golden Age of Gas" will give valuable insight into the environmental challenges linked to shale gas. The report, to be released in two weeks time, will certainly contribute to a better understanding of the advantages and challenges related to unconventional gas.

Secondly, we need to develop CCS and increase its use. Yes, there are obvious challenges (technological, financing, "NIMBY" – not in my back yard), but I am an optimist and believe that our Norwegian-Polish partnership will be central in bringing this forward. Should be seen as an important contribution to global efforts to combat climate change.

Thirdly, renewables. Increasing the share of renewables in the energy mix is required in order to reduce CO2 emissions. Investment costs are sinking, paving the way for increased use of energy sources that are available in most European countries, whether in the form of water, wind, sunlight, biomass or geothermic heat.

Fourthly, but not least, we need to pursue measures to improve energy efficiency. Has been considered a "low hanging fruit" because the technology is available, it saves energy costs and reduces emissions. Still, Europe is moving slowly towards its targets in 2020. We all need to make efforts in this respect.

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Summary and conclusions

Norway as a leading and responsible actor in the High North. At the forefront of knowledge and resource management. We will ensure the highest standards and preparedness for increased oil and gas activity in the Arctic.

Second: The High North/Arctic as a resource-rich area and one of the most stable regions in the world. The High North can play a role in enhancing energy security in Europe as well as knowledge about global climate change.

The world needs more and cleaner energy. The complexity of the global energy picture. Interdependence.

Third: Norway – Poland. Energy reality differs, but many issues of mutual interest. Should continue to develop our bilateral relations in the field of energy, but need to have a European, and partly global, perspective in doing so.